Criticism of capitalism


Criticism of capitalism
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Capitalism has been the subject of criticism from many perspectives during its history. Criticisms range from people who disagree with the principles of capitalism in its entirety, to those who disagree with particular outcomes of capitalism. Among those wishing to replace capitalism with a different method of production and social organization, a distinction can be made between those believing that capitalism can only be overcome with revolution (e.g., revolutionary socialism) and those believing that structural change can come slowly through political reforms to capitalism (e.g., classic social democracy). Some critics recognize merits in capitalism and wish to balance capitalism with some form of social control, typically through government regulation (e.g., social market movement and British Labour Party).

Contents

History

According to contemporary critics[quantify] of capitalism, rapid industrialization in Europe created working conditions viewed as unfair, including: 14-hour work days, child labor, and shanty towns.[1] Some modern economists argue that average living standards did not improve, or only very slowly improved, before 1840.[2]

Early socialist thinkers rejected capitalism altogether, attempting to create socialist communities free of the perceived injustices of early capitalism. Among these utopian socialists were Charles Fourier and Robert Owen. In 1848, Karl Marx and Frederick Engels released the Communist Manifesto, which outlined a political and economic critique of capitalism based on the philosophy of historical materialism. Pierre-Joseph Proudhon a contemporary of Marx was another notable critic of capitalism, and was one of the first to call himself an anarchist.

IWW poster "Pyramid of the Capitalist System"(c. 1911), depicting an anarchist perspective on statist/capitalist social structures

By the early 20th century, a myriad of socialist tendencies (e.g., anarcho-syndicalism, social democracy and Bolshevism) had arisen based on different interpretations of current events. Governments also began placing restrictions on market operations and created interventionist programs, attempting to ameliorate perceived market shortcomings (e.g., Keynesian economics and the New Deal). Starting with the 1917 Russian revolution, Communist states increased in numbers, and a Cold War started with the developed capitalist nations. Following the Revolutions of 1989, many of these Communist states adopted market economies. The notable exceptions to this trend have been North Korea, Cuba, and Venezuela, the latter instituting a philosophy referred to as "Socialism of the 21st century".

Issues

Democracy and economic freedom

Capitalist systems have often functioned under unelected governments: the classic case is the United Kingdom, where less than 20% of adult males could vote prior to 1885, and women did not receive the vote until 1918.[3]

Economist Branko Horvat stated: "... it is now well known that capitalist development leads to the concentration of capital, employment and power. It is somewhat less known that it leads to the almost complete destruction of economic freedom."[4]

Exploitation

Of Usury, from Brant's Stultifera Navis (the Ship of Fools); woodcut attributed to Albrecht Dürer

Critics of capitalism view the system as inherently exploitative. In an economic sense, exploitation is often related to the expropriation[disambiguation needed ] of labor for profit and based on Marx's version of the labor theory of value. The labor theory of value was supported by classical economists like David Ricardo and Adam Smith who believed that "the value of a commodity depends on the relative quantity of labor which is necessary for its production."[5]

In Das Kapital, Karl Marx identified the commodity as the basic unit of capitalist organization. Marx noted a "common denominator" between commodities, in particular that commodities are the product of labor and are related to each other by an exchange value (i.e., price).[6] By using the labor theory of value, Marxists see a connection between labor and exchange value, in that commodities are exchanged depending on the socially necessary labor time needed to produce them.[7] However, due to the productive forces of industrial organization, laborers are seen as creating more exchange value during the course of the working day than the cost of their survival (food, shelter, clothing, etc.).[8] Marxists argue that capitalists are thus able to pay for this cost of survival, while expropriating the excess labor (i.e., surplus value).[7]

Marxists further claim that due to economic inequality, the purchase of labor cannot occur under "free" conditions. Since capitalists control the means of production (e.g., factories, businesses, machinery) and workers control only their labor, the worker is naturally coerced into allowing their labor to be exploited.[9] Critics argue that exploitation occurs even if the exploited consents, since the definition of exploitation is independent of consent. In essence, workers must allow their labor to be exploited or face starvation. Since some degree of unemployment is typical in modern economies, Marxists argue that wages are naturally driven down in free market systems. Hence, even if a worker contests their wages, capitalists are able to find someone from the reserve army of labor who is more desperate.[10]

Unions are the "traditional method" for workers to have more bargaining power in the marketplace.[citation needed] The act (or threat) of striking has historically been an organized action to withhold labor from capitalists, without fear of individual retaliation.[11] Some critics of capitalism, while acknowledging the necessity of trade unionism, believe that trade unions simply reform an already exploitative system, leaving the system of exploitation intact.[12][13] Lysander Spooner argued that "almost all fortunes are made out of the capital and labour of other men than those who realize them. Indeed, large fortunes could rarely be made at all by one individual, except by his sponging capital and labour from others."[14]

Labor historian Immanuel Wallerstein has argued that unfree labor—by slaves, indentured servants, prisoners, and other coerced persons—is compatible with capitalist relations.[15]

Modern skeptics of free market capitalism observe that while in major capitalist economies the minimum wage is legislatively imposed by the state, there is no maximum wage limit, which is supposedly determined by the forces of the free market. They further assert that the minimum wage measure does not serve to set a lower limit in a worker's earnings; it actually functions as an upper limit on the earnings of a person that just enters the workforce. The existence of minimum wage, coupled with the absence of maximum, permits rapid wealth accumulation and leads to a phenomenon termed "plutonomy" by Citigroup.[16] In effect, wages are kept low for almost all of the population while the remaining minute percentage is allowed to meet overwhelming profits.

Academics such as Howard Gardner have proposed the adoption of upper limits in individual wealth as "a solution that would make the world a better place".[17]

Imperialism and political oppression

Critics[18] argue that the ills caused by capitalism include imperialism and oppression. They point systematic violence against political opponents, participation in coups that have placed dictators in power (for example Augusto Pinochet in Chile, Argentina with its "Dirty War"); and large scale democide (like in the Congo Free State).[citation needed] Although some of these violations occurred during a time period and in states sometimes considered being more capitalist than today since the government share of the economy was much smaller, U.S and European support of multinational-friendly capitalist dictatorships in Latin America and Africa lasted until the mid 1980s.

Near the start of the 20th century, Vladimir Lenin claimed that state use of military power to defend capitalist interests abroad was an inevitable corollary of monopoly capitalism.[19] Critics of capitalism allege the system is responsible for not only economic exploitation, but imperialist, colonialist and counter-revolutionary wars, repressions of workers and trade unionists, genocides and massacres.

Marxists, importantly Vladimir Lenin, argue that capitalism needs imperialism in order to survive.[20] The unplanned nature of capitalism, they say, inevitably overproduces commodities and overuses resources, which leads it to expand its markets into and drain the resources out of other, less-developed nations. The wealthy nations, they say, must maintain cheap access to third world natural resources and unfree labor, by force if necessary. They argue that the capitalist countries like England initially were helped by the primitive accumulation of capital through the "theft" of natural resources and exploitation of slave labor from large parts of Asia, Africa and the Americas, which spurred the industrial revolution. They see what they characterize as unjust exploitation, militarily (such as India in 19th century) or economically (e.g., through International Monetary Fund structural adjustment programs during the 1980s), as part of the nature of capitalism. The constant, capitalist drive to expand markets is viewed by many as the primary cause of globalization.[21]

In his essay, Imperialism: The Highest Stage of Capitalism, Vladimir Lenin advanced the now widespread thesis that the ‘New Imperialism’ of the late 19th and early 20th centuries was an inevitable corollary of monopoly capitalism.[22] According to Lenin, the export of financial capital superseded the export of commodities; banking and industrial capital merged to form large financial cartels and trusts in which production distribution are highly centralized; and monopoly capitalists influenced state policy to carve up the world into spheres of interest (Burnham). These trends led states to defend their capitalist interests abroad through military power.

Inefficiency and waste

Some opponents criticize capitalism's perceived inefficiency. They note a shift from pre-industrial reuse and thriftiness before capitalism to a consumer-based economy that pushes "ready-made" materials.[23] It is argued that a sanitation industry arose under capitalism that deemed trash valueless; a significant break from the past when much "waste" was used and reused almost indefinitely.[23] In the process, critics say, capitalism has created a profit driven system based on selling as many products as possible.[24] Critics relate the "ready-made" trend to a growing garbage problem in which the average American throws out 4.5 pounds of trash per day (compared to 2.7 pounds in 1960).[25] Anti-capitalist groups with an emphasis on conservation include eco-socialists and social ecologists.

Planned obsolescence has also been criticized as a wasteful practice under capitalism. By designing products to wear out faster than need be, new consumption is generated.[23] This would benefit corporations by increasing sales, while at the same time generating excessive waste. A well-known example is the charge that Apple designed its iPod to fail after 18 months.[26] Critics view planned obsolescence as wasteful and an inefficient use of resources.[27] Other authors such as Naomi Klein have criticized brand-based marketing for putting more emphasis on the company's name-brand than on manufacturing products.[28]

Inequality

A man at the protest event Occupy Wall Street critiquing Capitalism in the context of the right to have a job

Critics argue that capitalism is associated with the unfair distribution of wealth and power; a tendency toward market monopoly or oligopoly (and government by oligarchy); imperialism, counter-revolutionary wars and various forms of economic and cultural exploitation; repression of workers and trade unionists, and phenomena such as social alienation, economic inequality, unemployment, and economic instability. Critics have argued that there is an inherent tendency toward oligolopolistic structures when laissez-faire is combined with capitalist private property. Capitalism is regarded by many socialists to be irrational in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions and thus should be controlled through public policy.[29]

In the early 20th century, Vladimir Lenin argued that state use of military power to defend capitalist interests abroad was an inevitable corollary of monopoly capitalism.[30]

Che Guevara wrote:

The laws of capitalism, which are blind and are invisible to ordinary people, act upon the individual without he or she being aware of it. One sees only the vastness of a seemingly infinite horizon ahead. That is how it is painted by capitalist propagandists who purport to draw a lesson from the example of Rockefeller — whether or not it is true — about the possibilities of individual success. The amount of poverty and suffering required for a Rockefeller to emerge, and the amount of depravity entailed in the accumulation of a fortune of such magnitude, are left out of the picture, and it is not always possible for the popular forces to expose this clearly.... It is a contest among wolves. One can win only at the cost of the failure of others.[31]

In the United States, the shares of earnings and wealth of the households in the top 1 percent of the corresponding distributions are 15 percent and 30 percent, respectively.[32] Critics[who?] claim that an untamed capitalist system has inherent biases favoring those who already possess greater resources. They say rich people can give their children a better education and inherited wealth, and that this can create or increase large differences in wealth between people who do not differ in ability or effort. One study showed that in the U.S., 43.35% of the people in the Forbes magazine "400 richest individuals" list were already rich enough at birth to qualify.[33] Another study indicated that in the US, wealth, race, and schooling are important to the inheritance of economic status, but that IQ is not a major contributor, and the genetic transmission of IQ is even less important.[34]

Market failure

"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone."

Market failure is a term used by economists to describe the condition where the allocation of goods and services by a market is not efficient. Keynesian economist[36] Paul Krugman views this scenario in which individuals' pursuit of self-interest leads to bad results for society as a whole.[37] From this, some critics of capitalism prefer economic intervention by government into free markets.[38] Some believe that the lack of perfect information and perfect competition in a free market is grounds for government intervention. Others perceive certain unique problems with a free market including: monopolies, monopsonies, insider trading, and price gouging.[weasel words][39]

Legislation has been introduced to deal with these concerns (e.g., anti-trust legislation or financial regulation). Also, governments overseeing capitalist economies have been known to set mandatory price floors or price ceilings at times, thereby interfering with the free market mechanism. This usually occurs in times of crisis, or relating to goods and services viewed as strategically important. Electricity, for example, is a good that has typically been subject to price ceilings in many countries.[40]

Wages determined by a free market mechanism are also commonly seen as a problem by those[who?] who claim that some wages are unjustifiably low or unjustifiably high. Another perceived failure is that free markets usually fail to deal with the problem of externalities, where an action by an outside agent positively or negatively affects another agent without any compensation.[weasel words][41] An example of an externality is pollution. More generally, free market allocation of resources in areas such as health care, unemployment, wealth inequality, and education are considered market failures by some.[42]

Poor distribution of goods has also been identified as a market failure. One critic noted that 200 million Indians went hungry in 1995, while the Indian economy was exporting $625 million worth of wheat and $1.3 billion worth of rice that same year.[43]

Market instability

Critics of capitalism, particularly Marxists, identify market instability as a permanent feature of capitalist economy.[44][45] Marx believed that the unplanned and explosive growth of capitalism does not occur in a smooth manner, but is interrupted by periods of overproduction in which stagnation or decline occur (i.e., recessions).[46] In the view of Marxists, several contradictions in the capitalist mode of production are present, particularly the internal contradiction between anarchy in the sphere of capital (i.e., free market) and socialised production in the sphere of labor (i.e., industrialism).[47] Due to the unplanned nature of the system, capitalists produce without knowing in advance what they can sell, while at the same time unleashing huge productive capabilities through industrial organization. The result is that crises are not caused by shortages, like a crop failure, but rather from a production of too many goods. Marx and Engels, in the Communist Manifesto, highlighted what they saw as a uniquely capitalist juxtaposition of overabundance and poverty: "Society suddenly finds itself put back into a state of momentary barbarism. And why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce."[46]

Property

Pierre-Joseph Proudhon and Friedrich Engels argue that the free market is not necessarily free, but weighted towards those who already own property.[10][48] They view capitalist regulations, including the enforcement of private property on land and exclusive rights to natural resources, as unjustly enclosing upon what should be owned by all, forcing those without property to sell their labor to capitalists and landlords in a market favorable to the latter, thus forcing workers to accept low wages in order to survive.[49] In his criticism of capitalism, Pierre-Joseph Proudhon believed that the emphasis on property is the problem. He claimed that property is theft, arguing that property leads to despotism: "Now, property necessarily engenders despotism—the government of caprice, the reign of libidinous pleasure. That is so clearly the essence of property that, to be convinced of it, one need but remember what it is, and observe what happens around him. Property is the right to use and abuse."[48] Many left-wing anarchists, such as anarchist communists, believe in replacing capitalist private property with a system where people can lay claim to things based on personal use and claim that "Property is the domination of an individual, or a coalition of individuals, over things; it is not the claim of any person or persons to the use of things" and "this is, usufruct, a very different matter. Property means the monopoly of wealth, the right to prevent others using it, whether the owner needs it or not."[50]

Mutualists and some anarchists support markets and private property, but not in their present form.[51] They argue that particular aspects of modern capitalism violate the ability of individuals to trade in the absence of coercion. Mutualists support markets and private property in the product of labor, but only when these markets guarantee that workers will realize for themselves the value of their labor.[48]

In recent times, most economies have extended property rights to include such things as patents and copyrights. Critics see this as coercive against those with few prior resources. They argue that such regulations discourage the sharing of ideas, and encourage nonproductive rent seeking behavior, both of which enact a deadweight loss on the economy, erecting a prohibitive barrier to entry into the market.[52] Not all pro-capitalists support the concept of copyrights, but those who do argue that compensation to the creator is necessary as an incentive.[52]

Sustainability

An economic system that produces strong economic growth and requires essentially free trade[53] may have a large effect on the environment.[54]

One of the main modern criticisms to the sustainability of capitalism is related to the so called commodity chains, or production/consumption chains.[55][56] These terms refer to the network of transfers of materials and commodities that is currently part of the functioning of the global capitalist system. Examples include high tech commodities produced in countries with low average wages by multinational firms, and then being sold in distant high income countries; materials and resources being extracted in some countries, turned into finished products in some others and sold as commodities in further ones; countries exchanging with each other the same kind of commodities for the sake of consumer's choice (e.g., Europe both exporting and importing cars to and from the U.S.). According to critics such processes, all of which produce pollution and waste of resources, are an integral part of the functioning of capitalism (i.e., its metabolism).[57]

Some leading conservation organizations such as the World Wide Fund for Nature and the United Nations Environment Programme argue that the impact of humanity on Earth is continually increasing. In 2004 they jointly reported that "humanity's Ecological Footprint grew by 150% between 1961 and 2000" and that most of this growth occurred in the 27 wealthiest countries of the world, in other words, the leading capitalist countries.[58] Critics note that the statistical methods used in calculating Ecological Footprint have been criticized and some find the whole concept of counting how much land is used to be flawed, arguing that there is nothing intrinsically negative about using more land to improve living standards (rejection of the intrinsic value of nature).[59][60]

Many environmentalists[who?] have long argued that the real dangers are due to the world's current social institutions that they claim promote environmentally irresponsible consumption and production. Under what they call the "grow or die" imperative of capitalism, they say, there is little reason to expect hazardous consumption and production practices to change in a timely manner[citation needed]. They also claim that markets and states invariably drag their feet on substantive environmental reform, and are notoriously slow to adopt viable sustainable technologies.[61][62] Immanuel Wallerstein, referring to the externalization of costs as the "dirty secret" of capitalism, claims that there are built-in limits to ecological reform, and that the costs of doing business in the world capitalist economy are ratcheting upward because of deruralization and democratization.[63]

Beyond environmental sustainability, there is the question of labor market and consumer market sustainability. In a constant-growth model, new individuals have to be constantly added to the free market economy (as labourers and/or consumers). With birth rates in decline, where will these new consumers and (cheap) labourers come from?[64]

Unemployment

Graph of Labor Market

An analysis of supply and demand of the type shown in introductory mainstream economics textbooks implies that by mandating a price floor above the equilibrium wage, minimum wage laws should cause unemployment.[65][66] This is because a greater number of workers are willing to work at the higher wage while a smaller numbers of jobs will be available at the higher wage.[65][66] Companies can be more selective in those whom they employ thus the least skilled and least experienced will typically be excluded.[65][66]

According to the model shown in nearly all introductory textbooks on economics, increasing the minimum wage decreases the employment of minimum-wage workers.[67] One textbook says:

If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. ... The direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. Others, particularly those with the lowest prelegislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed or out of the labor force.[68]

Another textbook says:

It is assumed that workers are willing to labor for more hours if paid a higher wage. Economists graph this relationship with the wage on the vertical axis and the quantity (hours) of labor supplied on the horizontal axis. Since higher wages increase the quantity supplied, the supply of labor curve is upward sloping, and is shown as a line moving up and to the right.[69]

One of the focal points of the 1914 novel, The Ragged Trousered Philanthropists, was the issue of employment. The novel is widely regarded as a classic of working-class literature and continues to be in publication today.[70]

Criticisms

Anarchist criticisms

Many socialist anarchists argue that capitalist ethics do not entail any positive moral obligation to help others in need. Libertarian socialist Noam Chomsky writes: "The idea of 'free contract' between the potentate and his starving subject is a sick joke, perhaps worth some moments in an academic seminar exploring the consequences of (in my view, absurd) ideas, but nowhere else."[71] Other critics regard private property to either be an aggressive institution or a potentially aggressive one, rather than a defensive one, and thus reject claims that relationships based on unequal private property relations could be voluntary.[72]

Marxian criticisms

Karl Marx saw capitalism as a historical stage, once progressive but would eventually stagnate due to internal contradictions and would eventually be followed by socialism. Marxists define capital as "a social, economic relation" between people (rather than between people and things). In this sense they seek to abolish capital. They believe that private ownership of the means of production enriches capitalists (owners of capital) at the expense of workers ("the rich get richer, and the poor get poorer"). In brief, they argue that the owners of the means of production do not work and therefore exploit the workerforce. In Karl Marx's view, the capitalists would eventually accumulate more and more capital impoverishing the working class, creating the social conditions for a revolution that would overthrow the institutions of capitalism. Private ownership over the means of production and distribution is seen as a dependency of non-owning classes on the ruling class, and ultimately a source of restriction of human freedom.

Marxists have offered various related lines of argument suggesting that capitalism is a contradiction-laden system characterized by recurring crises having a tendency towards increasing severity. They have claimed that this tendency of the system to unravel combined with a socialization process that links workers in a worldwide market are two major factors that create the objective conditions for revolutionary change. Capitalism is seen as just one stage in the evolution of the economic system. Immanuel Wallerstein, approaching matters from a world-systems perspective, cites the intransigence of rising real wages, rising costs of material inputs, and steadily rising tax rates, along with the rise of popular antisystemic movements as the most important global secular trends creating unprecedented limiting pressures on the accumulation of capital. According to Wallerstein, "the capitalist world-economy has now entered its terminal crisis, a crisis that may last up to fifty years. The real question before us is what will happen during this crisis, this transition from the present world-system to some other kind of historical system or systems." [73]

Normative Marxism advocates for a revolutionary overthrow of capitalism that would lead to socialism, before eventually transforming into communism after class antagonisms and the state ceased to exist. Marxism influenced social democratic and labour parties as well as some moderate democratic socialists, who seek change through existing democratic channels instead of revolution, and believe that capitalism should be regulated rather than abolished, supplementing the market economy with a mixed economy.[citation needed]

Marxist and feminist geographers critique capitalism primarily on the basis of social and environmental justice.[citation needed] Marxian development geographers analyse the "contractions" of capitalism, class struggle, uneven development and imperialism in the global South by employing historical-material analysis (‘little d’ development).[citation needed] This work investigates patterns of accumulation, class formation and politics in rural and urban areas, the role of the state, struggles over resources and the articulation of peasant production with agrarian capitalism. Feminist political-economy researchers are interested in the ways that these processes are gendered and also take into account a serious consideration of social reproduction in concern with capitalist production processes.[citation needed]

In mainland China differences in terminology sometimes confuse and complicate discussions of Chinese economic reform. Under Marxist ideology, capitalism refers to a stage of history in which there is a class system in which the proletariat is exploited by the bourgeoisie. Officially, according to the Chinese governments State ideology, China is currently in the primary stage of socialism with Chinese characteristics.[citation needed] However, because of Deng Xiaoping's and subsequent leaders Chinese economic reforms, instituting pragmatism within policy, China has undertaken policies that are commonly considered capitalistic, including employing wage labor, increasing unemployment to motivate those who are still working[citation needed], transforming state owned enterprises into joint stock companies, and encouraging the growth of the joint venture and private capitalist sectors. A contrary Marxist view would describe China as just another variant of capitalism (state capitalism), much like the former USSR, which was also claiming to be operating on principals of socialism. This is echoed by what Mao Tse-Tung termed "capitalist roaders" who he argued existed within the ruling Party structures and would try to restore the bourgeoisie and thus their class interests to power reflected in new policies, while only keeping the outer appearance of socialism for legitimacy purposes. Deng Xiaoping was identified as one of these "capitalist roaders" during the Chinese Cultural Revolution, when he was placed under house arrest.[citation needed]

Socialist criticisms

Socialists argue that the accumulation of capital generates waste through externalities that require costly corrective regulatory measures. They also point out that this process generates wasteful industries and practices that exist only to generate sufficient demand for products to be sold at a profit (such as high-pressure advertisement); thereby creating rather than satisfying economic demand.[74][75]

Socialists argue that capitalism consists of irrational activity, such as the purchasing of commodities only to sell at a later time when their price appreciates, rather than for consumption, even if the commodity cannot be sold at a profit to individuals in need; therefore, a crucial criticism often made by socialists is that making money, or accumulation of capital, does not correspond to the satisfaction of demand (the production of use-values).[76] The fundamental criterion for economic activity in capitalism is the accumulation of capital for reinvestment in production; this spurs the development of new, non-productive industries that don't produce use-value and only exist to keep the accumulation process afloat (otherwise the system goes into crisis), such as the spread of the financial industry, contributing to the formation of economic bubbles.[77]

Socialists view private property relations as limiting the potential of productive forces in the economy. According to socialists, private property becomes obsolete when it concentrates into centralized, socialized institutions based on private appropriation of revenue (but based on cooperative work and internal planning in allocation of inputs) until the role of the capitalist becomes redundant.[78] With no need for capital accumulation and a class of owners, private property in the means of production is perceived as being an outdated form of economic organization that should be replaced by a free association of individuals based on public or common ownership of these socialized assets.[79][80] Private ownership imposes constraints on planning, leading to uncoordinated economic decisions that result in business fluctuations, unemployment and a tremendous waste of material resources during crisis of overproduction.[81]

Excessive disparities in income distribution lead to social instability and require costly corrective measures in the form of redistributive taxation, which incurs heavy administrative costs while weakening the incentive to work, inviting dishonesty and increasing the likelihood of tax evasion while (the corrective measures) reduce the overall efficiency of the market economy.[82] These corrective policies limit the incentive system of the market by providing things such as minimum wages, unemployment insurance, taxing profits and reducing the reserve army of labor, resulting in reduced incentives for capitalists to invest in more production. In essence, social welfare policies cripple the capitalism and its incentive system and are thus unsustainable in the long-run.[83] Marxists argue that the establishment of a socialist mode of production is the only way to overcome these deficiencies. Socialists and specifically Marxian socialists, argue that the inherent conflict of interests between the working class and capital prevent optimal use of available human resources and leads to contradictory interest groups (labor and business) striving to influence the state to intervene in the economy in their favor at the expense of overall economic efficiency.

Early socialists (Utopian socialists and Ricardian socialists) criticized capitalism for concentrating power and wealth within a small segment of society that controls the means of production and derives its wealth through a system of exploitation.[citation needed] This creates a stratified society based on unequal social relations that fails to provide equal opportunities for every individual to maximize their potential,[84] and does not utilise available technology and resources to their maximum potential in the interests of the public.[80]

Religious criticisms

"Christ drives the Usurers out of the Temple", a woodcut by Lucas Cranach the Elder in Passionary of Christ and Antichrist.[85]

Many religions have criticized or opposed specific elements of capitalism; traditional Judaism, Christianity, and Islam forbid lending money at interest. Christianity has been a source of both praise and criticism for capitalism, particularly its materialist aspects.[86] The first socialists drew many of their principles from Christian values, against "bourgeois" values of profiteering, greed, selfishness, and hoarding.

Some Christian critics of capitalism may not oppose capitalism entirely, but support a mixed economy in order to ensure adequate labor standards and relations, as well as economic justice. Pope Benedict XVI issued an encyclical Caritas in veritate (Charity in Truth) in 2009; he stated: "The dignity of the individual and the demands of justice require, particularly today, that economic choices do not cause disparities in wealth to increase in an excessive and morally unacceptable manner."[87] and "Therefore, it must be borne in mind that grave imbalances are produced when economic action, conceived merely as an engine for wealth creation, is detached from political action, conceived as a means for pursuing justice through redistribution."[88]

Islamic law recognizes the right to private property but regulates economic activities. A 2.5% alms tax (Zakat) is levied on all gold, crops, and cattle. Shia Twelver Muslims pay an additional 20% on all savings (defined as income minus expenses on necessities like food and shelter.) Usury or riba is forbidden, and religious law encourages the use of capital to spur economic activity while placing the burden of risk along with the benefit of profit with the owner of the capital. Methods of Islamic banking have been developed. The Islamic constitution of Iran, which was drafted mostly by Islamic clerics, criticizes "materialist schools of thought" that encourage "concentration and accumulation of wealth and maximization of profit."[89] Sayyid Qutb, an Islamist writer, criticized capitalism in his 1951 book The Battle Between Islam and Capitalism.[90]

See also

Notes

  1. ^ Engels, Frederick. "The Condition of the Working Class in England". http://www.marxists.org/archive/marx/works/1845/condition-working-class/index.htm. Retrieved 2008-04-16. 
  2. ^ Clark Nardinelli, economist at the U.S. Food and Drug Administration. "Industrial Revolution and the Standard of Living". The concise encyclopedia of economics. The Library of Economics and Liberty. http://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLiving.html. Retrieved 2008-04-20. 
  3. ^ http://www.electoral-reform.org.uk/diary/historylesson.htm
  4. ^ Horvat, Branko, The Political Economy of Socialism (Armonk, NY: M.E. Sharpe, Inc.) p.11
  5. ^ Ricardo, David. "Chapter 1: On Value -- On the Principles of Political Economy and Taxation". http://www.marxists.org/reference/subject/economics/ricardo/tax/ch01.htm. Retrieved 2008-03-10. 
  6. ^ Marx, Karl (1992). Chapter 1: Commodities -- Capital, Volume 1. Penguin Classics. ISBN 0140445684. http://marxists.org/archive/marx/works/1867-c1/ch01.htm#S1. 
  7. ^ a b Marx, Karl. "Value, Price, and Profit". http://www.marxists.org/archive/marx/works/1865/value-price-profit/. Retrieved 2008-03-10. 
  8. ^ Marx, Karl. "Wage Labour and Capital". http://marxists.org/archive/marx/works/1847/wage-labour/ch06.htm. Retrieved 2008-03-10. 
  9. ^ Engels, Frederick. "Competition -- The Condition of the Working Class in England". http://www.marxists.org/archive/marx/works/1845/condition-working-class/ch05.htm. Retrieved 2008-03-10. 
  10. ^ a b Engels, Frederick. "Historical Materialism -- Socialism: Utopian and Scientific". http://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm. Retrieved 2008-03-10. 
  11. ^ Kautsky, Karl. "Trade Unions and Socialism". http://www.marxists.org/archive/kautsky/1901/04/unions.htm. Retrieved 2008-03-10. 
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